The deal brings an end to speculation that Suarez, 25, could call time on Liverpool career this summer, with Juventus having been strongly linked with a bid.

"To sign a new contract with Liverpool is unbelievable for me because I am so happy here at both the club and also in the city," Suarez told the club's official website. "That is important for me and I am very happy with my new contract.

"When you are a kid, everybody wants to play for Liverpool. I am here now and it is a dream for me, and now I am a Liverpool fan. I am happy off the pitch because the people of Liverpool are good with me and my family. I try my best on the pitch and when you are happy off the pitch, you are happy on the pitch.

"I want to say thank you to the fans because they are our 12th player. The supporters of Liverpool are unbelievable. Five or six years ago I watched on TV the stadium and the club, and now I play here and the supporters have helped me. That's very important for me."

Suarez has been involved in controversy during his time at Anfield and was suspended for nine consecutive matches in the 2011-12 season, but he has netted 21 goals in 52 games since joining from Ajax for £22 million in January 2011 and has been one of the Premier League's most impressive players.

New Liverpool boss Brendan Rodgers views Suarez, who has recently returned to the club following Olympic duty with Uruguay, as a key player in his bid to revolutionise the team's approach.

Rodgers said: "I'm delighted. When you have the opportunity to work with world-class players it's fantastic. There were certainly a few clubs who were interested in him but over the off-season he and I communicated well - and he's committed himself for the long term here now.

"He's really looking forward to playing in this way of working. As a manager and for the supporters, I'm delighted because I know how important he is for them."

Liverpool have not announced the length of the deal but it is believed to run until 2016.